Hematopoietic progenitor cells require lymphocytes and their soluble products for normal growth in vitro. Patients with aplastic anemia often respond to anti-thymocyte globulin, a potent immunosuppressive agent. To investigate specific functions of lymphocytes, we have studied lymphokines, the soluble products of these cells, by measuring their production in patients with aplastic anemia and their role in supporting or suppressing bone marrow colony formation. We have identified interferon as the in vitro mediator of hematopoietic suppression in experiments using cells and serum from patients with aplastic anemia. Patients with aplastic anemia have marked abnormalities of interferon production and circulating levels of interferon; the interferon present in the serum from both blood and bone marrow in aplastic anemia is the Gamma subtype. Normal individuals show small amounts of Alpha interferon in their bone marrow. We have demonstrated marked synergy in the antiproliferative effects of Alpha and Gamma interferon. Interferon has been demonstrated to directly effect the proliferation of hematopoietic progenitors isolated from primary cell culture. Furthermore, the cell producing interferon in the normal bone marrow is a helper (T4) lymphocyte. In contrast, patients with aplastic anemia show increased numbers of activated suppressor lymphocytes in their peripheral blood (T8 positive, TAC positive, HLADR positive). In at least one patient with aplastic anemia, these cells are responsible for both interferon production and hematopoietic suppression. It appears likely that the mechanism of action of ATG is directed to this abnormal suppressor cell.